Is alternative risk transfer right for your business? Here’s what you need to know

Joe Ferenchak, SVP Insurance Strategist and Carrier Relations Leader, Huntington Insurance, Inc.

As insurance markets grow more volatile and risks become more complex, many businesses are rethinking how they finance and manage risk. Alternative risk transfer (ART) offers a way to take back control, giving organizations more flexibility, more stability, and more say in how their insurance dollars work for them.

Key takeaways

Strategic risk financing

Alternative risk transfer (ART) is becoming an increasingly attractive strategy for organizations seeking more freedom over how they finance and manage risk.

Greater risk control

ART offers more control, customization, and stability, especially in volatile insurance markets.

Structured risk solutions

Structured risk programs and captive stop-loss solutions are expanding ART’s value and flexibility for businesses exploring new risk financing strategies.

In today’s unpredictable market, many businesses are looking for ways to gain control over their costs and coverage, especially in risk areas such as climate, supply chain disruptions, or other risks that may be difficult to insure in the traditional insurance marketplace. These pressures are pushing organizations to look beyond traditional guaranteed cost insurance and explore alternative risk transfer (ART) opportunities.

If you’ve heard the term, but are not quite sure what it means, you are not alone. ART is a more strategic, customizable way for businesses to finance and manage their risk. Through structures like group captives, single-parent captives, and structured risk programs, companies can retain more control, tailor coverage, and potentially participate in underwriting profit.

Industry data confirms this momentum. Captive insurance experienced significant growth in 2025, as organizations sought stability, embraced new coverages, and adopted new technologies1.

Understanding what alternative risk transfer means

In its simplest form, ART is an alternative to transferring 100% of your risk to an insurance carrier. Instead, your business takes on a measured portion of your own risk, supported by formal structures, while still buying excess coverage for catastrophic events.

Traditional insurance is transactional: a business pays a premium; the insurer pays the claims; the insurer keeps the profit. In contrast, ART turns insurance into a strategic asset:

  • You retain predictable risk.
  • You fund losses more efficiently.
  • You potentially earn back unused premium.
  • You build long-term surplus.
  • You potentially gain greater stability from market cycles.

Captives, whether group or single-parent, are at the center of this strategy. Collectively, captives write approximately $62 billion in direct premiums annually and are considered essential tools for risk management programs1.

Group vs. single-parent captives: Which path fits your business?

    Why businesses are turning to ART now

    Beyond market pressures, several strategic factors are accelerating ART adoption.

    Stronger financial performance than traditional insurance

    Captives have consistently outperformed commercial insurers, maintaining combined ratios around 83% compared to roughly 100% for commercial casualty peers1.

    Broader availability of innovative alternative risk transfer solutions

    The ART landscape isn’t limited to traditional captives. Structures gaining momentum include:

    • Structured risk programs for challenging layers such as casualty buffer or low excess property.
    • Captive stop-loss programs to protect retained risk and stabilize capital erosion.

    Better alignment with enterprise risk management and long-term strategy

    Captives increasingly play a role in:

    What makes a business a good candidate for alternative risk transfer?

    A common misconception is that captives are a way to immediately reduce insurance costs. This is rarely the case. Captives require the ability and willingness to take risk. Companies most likely to succeed with ART typically have:

    • Stable, predictable loss patterns.
    • Demonstrate mature risk management practices.
    • Financial readiness to retain risk.
    • Long-term thinking.
    • Frustration with rising premiums or shrinking capacity.

    Organizations lacking strong internal safety practices may not be ready for ART, but they can mature into readiness with the right advisory support.

    Is alternative risk transfer right for your business?

    Exploring ART does not mean abandoning traditional insurance; it simply expands the tools available to you. As risks become more complex and commercial insurance markets grow more volatile, this approach is quickly shifting from a niche option to a mainstream strategy for businesses that want more control, more transparency, and more long-term stability.

    If you’re wondering whether ART could be a fit for your business, you don’t have to figure it out alone. Huntington Insurance can help you assess your readiness, strengthen your risk management foundation, and walk you through the captive and ART landscape to find the structure that truly aligns with your goals.

    Connect with our team today and we’ll help you explore next steps.

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